Driven by fast price hikes in food, beverages; Nov. rate may be even higher—PSA
Inflation in October shot up to an almost 14-year high of 7.7 percent from 6.9 percent in September, driven by faster increases in the prices of food and non-alcoholic beverages, the Philippine Statistics Authority (PSA) said Friday.
National Statistician and Civil Registrar General Dennis Mapa said in an online briefing that the inflation rate in October was the fastest since the 7.8 percent posted in December 2008 during the global financial crisis.
Inflation, which is the rate of increase in prices over a given period of time, was also significantly faster this month than the 4 percent posted in October 2021.
Mapa said the inflation rate for food was 9.4 percent in October, accounting for an 18 percent share in overall inflation.
The October rate brings the average inflation for the first 10 months to 5.4 percent, well over the target range of 2 percent to 4 percent set by the government.
Mapa said more price increases were likely.
“Inflation may still accelerate this month [November]… There is a substantial probability of an increase in November 2022,” Mapa said, noting the recent increase in the price of liquefied petroleum gas.
“There was a push in food prices and the recent typhoons would not help,” Mapa said, referring to a series of destructive typhoons that did significant damage to agriculture.
Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said tropical storm Paeng could lead to some pick up in food and agricultural prices and overall inflation especially in hard-hit areas, as well as some seasonal increase in demand and prices of holiday-related products towards December. But he said price increases might ease after the holiday season by early January.”
The continued increase in inflation in October was driven by faster inflation rates in key commodity groups, particularly food and non-alcoholic beverages, which increased to 9.4 percent from 7.4 percent in September 2022.
Among the top contributors to October 2022 inflation are meat, fish, and vegetables (1.7 percentage points); electricity, gas, and other fuels (1.1 percentage points); operation of personal transport (0.6 percentage points); food and beverage services (0.5 percentage points); passenger transport services (0.5 percentage points); and housing rentals (0.5 percentage points).
The National Economic and Development Authority said the surge in prices resulted from external price pressures, such as the Russia-Ukraine war and COVID-19 lockdowns imposed in parts of China, which disrupted global supply chains. It also pointed to the lingering aftermath of recent typhoons.
Economic Planning Secretary Arsenio Balisacan said the government’s immediate priority was to continue supporting the most vulnerable sectors of the economy, hence, the cash transfers and fuel discounts would continue.
“This will alleviate the effects of the sustained increase in commodity prices as a result of global headwinds as well as the recent typhoons which damaged our domestic production and disrupted food supply,” Balisacan said in a statement.
Balisacan said the medium-term strategy was to invest in innovations and appropriate technologies and systems to make the economy and communities resilient. Equally important is the need to improve the governance structure for managing water resources and, at the same time, mitigating the risks from water-induced disasters. These strategies will be elaborated in the upcoming Philippine Development Plan 2023-2028.
“It’s high time that we boost support for the agriculture sector not only in post-disaster recovery, but more importantly through preemptive measures. To sustain productivity and resilience, climate-adaptive agricultural technologies should be put in place and value chains strengthened,” Balisacan said.
The 7.7 percent October 2022 inflation was within the Bangko Sentral ng Pilipinas’ forecast range of 7.1 to 7.9 percent for the month.
BSP Governor Felipe Medalla earlier said monetary authorities will increase the benchmark interest rate by another 75 basis points in the next policy meeting in the middle of this month after the US Federal Reserve raised again its policy rate by 75 bps on Wednesday to rein in inflation in the world’s biggest economy.
“This supports the BSP’s stance to hike its policy rate by the same amount in its next policy meeting on Nov. 17,” Medalla said, noting that this would temper any impact the Fed rate increase would have on the country’s exchange rate.
President Ferdinand Marcos Jr. ordered the continuation of support to the most vulnerable sectors through the distribution of cash transfers and fuel discounts to help cushion the impact of rising inflation, the Palace said.
Office of the Press Secretary officer-in-charge Cheloy Garafil said this would be part of the government’s key response to rising inflation.
“We assure the public that the government continues to monitor inflation and all contributing factors and will explore all other measures to alleviate its impact on our people,” she said.
The OPS also said that Mr. Marcos committed to support farmers and other stakeholders in agriculture in post-disaster recovery while improving the value chain and investing in climate-smart technologies in the medium and long term.
“Effective management of water resources will also be prioritized to reduce water-induced damage to lives, livelihood and property,” she said.
The President also directed concerned agencies to “invest in innovations and technologies to make… communities and businesses resilient amid extreme weather challenges.”
Finance Secretary Benjamin Diokno said Friday that addressing inflation remains the top priority of the Marcos administration.
“Although inflation is expected to remain elevated for the rest of the year with the impact of severe tropical storm Paeng on food supply and persistent global supply chain issues, the government will help ensure that inflation will be on a target-consistent path over the medium term with the implementation of direct measures to address supply shocks,” Diokno said.
Diokno assured the public that the government is taking measures to address supply shocks and bottlenecks.
These include improving local production, ensuring the timely importation of key commodities including fertilizers and raw materials, improving distribution efficiency, and ensuring energy security.
To help address food and energy inflation until the end of the year, the economic team is working for the extension of Executive Order No. 171, which reduced the Most Favored Nation (MFN) rates on pork, rice, corn, and coal. The Tariff Commission will conduct a public hearing on Nov. 9, 2022 to gather position papers from various stakeholders.
Last month, the President acknowledged that life “is getting hard” for Filipinos amid rising inflation. He said his administration is committed to giving continuous assistance to vulnerable sectors who are most hurt by surging consumer prices.
Leading the distribution of government cash assistance to various sectors in Talisay City, Negros Occidental, Marcos acknowledged how many Filipinos continue to struggle to make ends meet with the costs of basic goods and necessities rising further due to recent oil price hikes.
“We know that life is getting hard today. Prices for basic commodities are increasing, gasoline, crude, all our basic necessities are increasing. That’s why even in our own small way, at least we can help,” he said in Filipino.
“As long as the people need help, the government will do everything to somehow help them,” he added.